Recognizing Questionable Merchant Account Sales Tactics

As is true with any representatives in any sales-driven industry, merchant account sales representatives are sometimes looked upon in a negative light. This attitude is unfortunate, especially since one of the biggest assets that you have when setting up a merchant account and beyond is an experienced representative to assist you and ensure that your merchant account is being set up correctly and that it remains competitive once you begin processing.

More often than not a few bad apples can spoil the whole bunch. If you've been in business for a while you probably have at least one sales representative a month come through your front door telling you that they can save you money on credit card processing.

MasterCard makes specific mention of questionable sales tactics like hidden fees, price gouging, bait-and-switch pricing, and the promise of a "guaranteed" merchant account approval in the ISO Guide to Working with Acquirers that they released in 2002. This guide did little to eliminate these tactics from use, but knowing how to recognize and overcome them will be the focus of this section.

High-pressure sales tactics are the most apparent questionable tactics for obvious reasons. If you ever feel uncomfortable or rushed when working with a provider, it's best to look elsewhere. There are many great providers available and you should never get pressured into a merchant account.

When you sign a merchant processing agreement (MAP) you are authorizing the merchant service provider to charge you for the rates and fees listed on the agreement. Legally, the provider is not authorized to charge you for anything that you have not agreed to on the MPA. After you acquire your merchant account and begin to process credit cards, it's important to keep an eye on the fees that are being charged to your account. Reference your merchant processing agreement and application to make sure that you are not being charged for fees that were not noted on the original documentation.

A common misconception about merchant accounts is that after an account is set up all whole host of additional fees are going to be charged. There should be no unexpected charges after you begin processing credit cards. The true definition of a hidden fee as it pertains to merchant processing is, "a discount rate or other fee associated with bankcard processing that is imposed upon a merchant without prior disclosure within the merchant processing agreement, application, or on subsequent merchant processing statements". Essentially, there is no such thing as a legal hidden fee. If you feel that you are being charged rates and fees that you were never made aware of you should seek legal assistance.

Price gouging often occurs when representative walk into businesses cold to sell merchant services. If a provider tries to price gouge they'll realize soon enough that they're not getting much business because their quotes keep getting rejected. However, if you deal with a provider that you feel is price gouging, it's best to look elsewhere instead of trying to bargain.

When looking for a merchant service provider, or when analyzing your current provider, you need to look at all of the discount rates that you are being charged including qualified, mid-qualified, and non-qualified fees. Price gouging on rates occurs when a provider offer a very low qualified processing rate and inflates the mid and non-qualified rates to make up for the loss.

The term bait-and-switch refers to the practice of enticing customers with very low rates and fees and then making those rates and fees unobtainable or otherwise misleading by not disclosing important details. The practice of bait-and-switch pricing is most often used by merchant service providers who advertise their signature debit rate as their regular credit rate.

VISA and MasterCard charge less to process a swiped debit card transaction than they do to process a regular credit card transaction, making it possible for merchant service providers to charge less for the transaction. Some providers will advertise this lower swiped debit rate as their regular credit card transaction rate.

Advertising a "Guaranteed Approval" or a "99% Approval Rate" is a common marketing tactic employed by merchant service providers. There is no such thing as a guaranteed merchant account approval, and there is no provider that can accurately claim they have a 99% approval rate.

There are different levels of merchant services providers such as independent sales offices (ISO), processors, acquirers, and agents that all utilize an underwriting process to evaluate the risk associated with a merchant account before approving it. The parties that most often claim to have a 99% approval rate are smaller ISOs or agents. Ironically, rarely will either of these entities have any say in whether underwriting approves or declines a merchant account application because they are not involved in the underwriting process. Regardless of this fact, some providers continue to guarantee that a merchant account application will be approved.

There is no such thing as a free merchant account. Some merchant service providers will advertise a merchant account as "free" if they are not charging any start up fees. All merchant accounts will have fees associated with processing credit card transactions.

VISA and MasterCard charge acquiring banks fees in order to process credit cards and these fees are passed along to the processor, then to the merchant service provider and ultimately to the merchant. The merchant is the end-user in the credit card processing equation and they will always have to pay for the ability to process credit card transactions.